Finding 1078282 (2023-002)

Significant Deficiency and Material Instance of Noncompliance - Special Tests & Provisions 2023-002 - Reserve Funds for Replacement Criteria: In accordance with its Housing Assistance Payment contract/RAD Conversion Commitment (RCC), the Housing Authority is required to establish and maintain a replacement reserve in an interest-bearing account to aid in funding extraordinary maintenance and repair and replacement of capital items in accordance with the RCC. Condition: As a result of our audit procedures we determined that while the replacement reserve accounts had been established, the HUD-approved required deposits were not made in accordance with the RCC. Cause: Management failed to follow required procedures for making the required deposits. Effect: Because the required deposits to the replacement reserve were not made and maintained, the Projects did not adequately escrow balances for the replacement reserve accounts. Questioned Costs: Undetermined. Recommendation: Management should establish internal controls and procedures to ensure that required monthly deposits are made in accordance with the RCC. Views of Responsible Officials and Planned Corrective Action: Management will make the monthly required deposits for the reserve in accordance with grant program requirements and their established procedures.